Carbon intensity in India on the rise due to rapid growth in demand for coal, even as global decarbonisation rate doubles in 2014

New Delhi, 02 Nov 2015: India’s energy emissions rose at 8.2% on-year in 2014 – highest in the world, driven by a double-digit growth in demand for coal, as power consumption increased in line with the rapid 7.4% growth in GDP.

Global emissions rose just 0.5%, albeit on a much lower world GDP growth of 3.3%.

The country’s carbon intensity grew 0.7%, as renewable energy adoption remained slow. However, its share in India’s energy mix remained unchanged at 7%, despite high growth in coal-fired power generation. By comparison, global carbon intensity fell 2.7%, recording steepest decline in seven years of the PwC analysis. India’s carbon intensity, despite rising in 2014, is about half that of China, and is still less than the global average.

India has taken several steps to control emissions and carbon intensity, including stringent emission standards, nationwide energy conservation programme, a recent four-fold increase in carbon tax, establishing smart cities, and building additional forest cover.

Arvind Sharma, Executive Director, Sustainability, PwC India said, “India’s Intended Nationally Determined Contribution (INDC) unveiled ambitious 2030 plan. There is a strong focus on renewable energy, energy efficiency, smart cities and stringent emission standards for coal fired power plants among others. With this ambitious plan which cuts across thematic areas ranging from mitigation to adaptation, we believe that India is in a good position to access low cost finance and clean technology.”

Over a longer period, India has reduced its carbon intensity by 1.4% per year between 2000 and 2014. Its rate of reduction in carbon intensity is slightly better than the global average of 1.3% per year during 2000-2014.

However, that’s short of the targeted 2.1% yearly reduction by 2030, as outlined in its Intended Nationally Determined Contribution (INDC) plan, in the lead up to Paris. India committed to reduce its carbon intensity by 33%-35% by 2030, from 2005 levels, in its INDC plan.

Being the 4th largest emitter and expected to be the world’s fastest growing major economy, India’s carbon intensity management will play an important role in determining world’s ability to limit the global temperature rise to 2°C by the year 2100.

Coal and oil are large parts of India’s energy consumption and GDP growth is expected to slow. This will make it hard for India, but it has still left a large gap between its target and the decarbonisation rate needed to achieve the target of limiting warming to two degrees.

The global carbon reduction of 1.3% per year in 2000-2014 also fell short of the 3% annual cut needed as per the Paris target. Moreover, globally, carbon intensity needs to be cut 6.3% per year, far more than the 3% Paris target, if the warming is to be limited at 2 degrees.

As per the report, despite progress by some countries, globally, the target level of reductions in greenhouse gas emissions per unit of GDP has been missed for the seventh successive year.

In the lead up to Paris, governments have submitted targets and plans on how they will tackle emissions. Known as INDCs, these targets imply a global average decarbonisation rate of 3% per year – more than doubling the business as usual rate since 2000. These national plans are expected to drive action in the power, transport and finance sectors.

Many countries have put regulation of coal front and centre of their plans and are setting targets for renewables and low emissions vehicles. A significant shift in investments will be required to achieve these targets and build cleaner coal technology such as carbon capture and storage. The financial services sector will need to mobilise investors and create new financial products that fund and insure these projects. The automotive sector could expect government support into low or zero carbon next-generation vehicles in countries such as Japan and South Korea, or face more stringent fuel efficiency targets in others.

Breaking the link between emissions and economic growth – or ‘uncoupling’ – is essential to avoid the worst impacts of climate change. With less than 50 days to go before Governments meet in Paris to agree how to tackle climate change, the analysis indicates positive signs of ‘uncoupling’.

Other highlights

2014 is the first year that more than one country (UK, France, Germany and Italy as well as the EU as a whole) achieved a decarbonisation rate of 6.3% or above, the rate required globally to limit warming to two degrees.

The UK achieves a record breaking 10.9% reduction in carbon intensity – the result of a strong economy, lower coal use and a warmer winter. China, the world’s largest emitter, is the best performing non-EU country in the table, with a decarbonisation rate of 6%.

Australia has slipped from the top spot, but it still recorded a decarbonisation rate of 4.7%.Carbon intensity actually rose in five countries: South Africa, India, Brazil, Saudi Arabia and Turkey.

Notes

Carbon budget: The target is an estimate of how much countries need to reduce their energy related emissions by, while growing their economy, in order to limit global warming to 2°C. 2°C of warming is the limit scientists agree is needed to ensuring the serious risks of runaway climate change impacts are avoided.

2014 is the first year we have seen more than one country achieve a rate of 6% or above, with five countries reaching this threshold, as well as the EU as a whole. The UK leads the index with a remarkable 10.9% decarbonisation. France was not far behind, and actually reduced carbon emissions by slightly more than the UK but experienced slower GDP growth. Italy and Germany posted very strong decarbonisation rates. Although Italy’s emissions fell rapidly, its economy also contracted slightly. Germany however achieved fairly rapid emissions reductions as well as economic growth of 1.6%. China also recorded a rapid decarbonisation rate. And while Australia has slipped from the top spot, it still recorded a decarbonisation rate of 4.7%.

Under the UN climate negotiations process, all countries are expected to put forward pledges (Intended Nationally Determined Contributions or INDCs) with the collective aim of reducing greenhouse gas emissions globally to limit the potential for global warming to 2°C by 2100.

A 3°C world is one in which the IPCC’s Fifth Assessment Report describes potential impacts including ocean acidification and frequent heatwaves and drought challenging global food supply and trade with knock on effects for migration and conflict. Furthermore there is potential that rising numbers of species face extinction, and more frequent extreme weather events will cause infrastructure damage, loss of life and business disruption

About The Low Carbon Economy Index (LCEI): The LCEI model combines energy-related carbon dioxide emissions with historic and projected GDP data, and the IPCC’s carbon budgets. The model covers energy and macroeconomic data from individual G20 economies, as well as world totals. Details of our model structure are available the Appendix of the LCEI report. The analyses of the Paris targets are based estimates of the decarbonisation rates implied by the INDCs submitted to UNFCCC and include the full national inventory of emissions (i.e. emissions from land use change, forestry, and industrial process).

PwC Low Carbon Economy Index 2015

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.